Gibraltar PR Inc v. Otoki Group Inc

PUBLISHED
UNITED STATES COURT OF APPEALS
FOR THE FOURTH CIRCUIT
GIBRALTAR, P.R., INCORPORATED,
Petitioner-Appellant,
v. No. 95-2877
OTOKI GROUP, INCORPORATED,
Respondent-Appellee.
Appeal from the United States District Court
for the District of Maryland, at Baltimore.
Benson E. Legg, District Judge.
(CA-95-606-L)
Argued: December 4, 1996
Decided: January 13, 1997
Before WILKINSON, Chief Judge, and NIEMEYER and
WILLIAMS, Circuit Judges.
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Affirmed by published opinion. Chief Judge Wilkinson wrote the
opinion, in which Judge Niemeyer and Judge Williams joined.
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COUNSEL
ARGUED: Cynthia Louise Leppert, NEUBERGER, QUINN,
GIELEN, RUBIN & GIBBER, P.A., Baltimore, Maryland, for Appel-
lant. Larry Lee Shatzer, II, ADDUCI, MASTRIANI & SCHAUM-
BERG, L.L.P., Washington, D.C., for Appellee. ON BRIEF: Hugh
M. Bernstein, NEUBERGER, QUINN, GIELEN, RUBIN & GIB-
BER, P.A., Baltimore, Maryland, for Appellant. Louis S. Mastriani,
ADDUCI, MASTRIANI & SCHAUMBERG, L.L.P., Washington,
D.C., for Appellee.
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OPINION
WILKINSON, Chief Judge:
Gibraltar P.R. and Otoki Group, two clothing companies based in
Puerto Rico, dispute the ownership of certain trademarks under a joint
agreement between the two companies. Gibraltar filed suit in United
States District Court, asking the court to compel Otoki to take the dis-
pute to arbitration. The court found it lacked subject matter jurisdic-
tion, and dismissed the case. Gibraltar, P.R. v. Otoki Group, 914
F.Supp. 1203 (D.Md. 1995). Because the plaintiff fails to allege any
violation of federal law and resolution of this dispute depends simply
on the interpretation of a contract, we affirm the judgment of the dis-
trict court.
I.
Gibraltar and Otoki formed a joint venture named Acorn Partners
on January 20, 1994. Two sections of the Joint Venture Agreement
("the Agreement") are important to this case. First is a clause requir-
ing all disputes arising out of the Agreement to be arbitrated rather
than litigated. Second is a provision assigning Acorn the right to use
all of Otoki's trademarks, which was amended ten months later to
assign Acorn all of Otoki's "right, title and interest in and to all trade-
marks and trade names that it currently utilizes or possesses." Otoki
insists that the amendment and assignment were invalid, while Gibral-
tar argues that they were properly approved.
The relationship between Gibraltar and Otoki soured soon after the
dispute over the amendment arose. Otoki threatened litigation if
Acorn or Gibraltar attempted to transfer the trademarks to themselves.
Gibraltar demanded arbitration. When Otoki refused, Gibraltar filed
a petition, in district court in Maryland, to compel arbitration. The
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district court dismissed the petition for lack of subject matter jurisdic-
tion. Gibraltar appeals.1
II.
The district court found, and neither party disputes, that this case
falls under section 4 of the Federal Arbitration Act. That provision
states:
A party aggrieved by the alleged failure, neglect, or refusal
of another to arbitrate under a written agreement for arbitra-
tion may petition any United States district court which,
save for any such agreement, would have jurisdiction under
Title 28, in a civil action or in admiralty of the subject mat-
ter of a suit arising out of the controversy between the par-
ties, for an order directing that such arbitration proceed in
the manner provided for in such agreement.
9 U.S.C. § 4. This statute "does not create any independent federal-
question jurisdiction." Moses H. Cone Memorial Hosp. v. Mercury
Constr. Corp., 460 U.S. 1, 25 n.32 (1983). In order to establish fed-
eral jurisdiction, therefore, Gibraltar must demonstrate that if there
were no agreement to arbitrate, a federal court would have jurisdic-
tion "of the subject matter of a suit arising out of the controversy
between the parties." 9 U.S.C. § 4; accord Whiteside v. Teltech Corp.,
940 F.2d 99, 102 (4th Cir. 1991). Because both parties are Puerto
Rican companies, diversity of citizenship is not present, so subject
matter jurisdiction must rest upon a federal question.
Gibraltar argues that subject matter jurisdiction in this case lies in
the Lanham Act, 15 U.S.C. §§ 1051-1127, the statute governing
actions for trademark infringement. Gibraltar contends that the Lan-
ham Act applies because trademarks are at issue in this case and two
of the remedies Gibraltar seeks are provided in federal law. Gibral-
tar's demand for arbitration requests, inter alia, a declaratory judg-
ment and an injunction against Otoki's future use of the disputed
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1 Numerous other actions have been filed involving the same parties
and dispute. Inasmuch as we lack subject matter jurisdiction here, we
have no occasion to address them.
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trademarks. Injunctive relief is available under the Lanham Act in
proper circumstances, 15 U.S.C. § 1116, and declaratory relief is
available under the Declaratory Judgment Act, 28 U.S.C. § 2201.
Gibraltar's arguments are unpersuasive. A dispute does not invoke
federal jurisdiction simply because the plaintiff seeks a remedy that
happens to be available in a federal statute. A violation of the federal
law is a necessary predicate for claiming the remedies of the Lanham
Act. 15 U.S.C. § 1116(a). As the district court put it:
If asking for a federal remedy without alleging a violation
of a federal right invoked subject-matter jurisdiction, then
the Arbitration Act, being a federal remedy, would furnish
jurisdiction. It does not, however. Moses H. Cone, 460 U.S.
at 25, n.32. Gibraltar's argument thus attempts to pull this
case into the arena of federal jurisdiction by its bootstraps,
which neither the Arbitration Act nor the Lanham Act
allows.
Gibraltar has in fact failed to allege a violation of the Lanham Act.
Under the Act, "a complainant must demonstrate that it has a valid,
protectible trademark and that the defendant's use of a colorable imi-
tation of the trademark is likely to cause confusion." Lone Star Steak-
house & Saloon v. Alpha of Va., Inc., 43 F.3d 922, 930 (4th Cir. 1995)
(emphasis added); accord 15 U.S.C. § 1114(1)(a) (Lanham Act vio-
lated if a party "use[s] in commerce" a trademark in a manner "likely
to cause confusion, or to cause mistake, or to deceive"). None of
Gibraltar's allegations address the type of infringing use covered by
the Lanham Act. Gibraltar does not even address the substantive stan-
dard of the Lanham Act -- the use of marks or imitations likely to
cause confusion among consumers. 15 U.S.C. § 1114. What Gibraltar
protests in this case is use in violation of rights of ownership. Indeed,
Gibraltar's demand for arbitration speaks of Otoki's alleged violation
of the Joint Venture Agreement between the two parties. The Lanham
Act is designed to address the registration and infringement of trade-
marks, not ownership disputes arising out of contracts.2
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2 The Lanham Act addresses the issue of ownership only in the context
of actual infringement disputes. See, e.g., Brittingham v. Jenkins, 914
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Gibraltar also attempts to find jurisdiction under the Declaratory
Judgment Act ("DJA"), 28 U.S.C. § 2201. However, like the Federal
Arbitration Act, the DJA does not provide a source of jurisdiction
which is independent of substantive federal law. Franchise Tax Board
v. Constr. Laborers Vacation Trust, 463 U.S. 1, 16-17 n.14 (1983).
Gibraltar's DJA claim, therefore, must fall back on the Lanham Act
for subject matter jurisdiction. Since Gibraltar alleges no violation of
the Lanham Act, its attempt to rely on the DJA likewise fails.
The Lanham Act does not confer jurisdiction simply because the
subject in dispute is a trademark. In essence, this case is a contract
dispute between the two companies over the ownership of property.
If the property at issue were lawnmowers rather than trademarks, the
proper legal resolution of the case would be no different. A dispute
over property ownership does not properly fall under federal law just
because the property is a federally-created interest like a trademark or
a copyright. See Speedco Inc. v. Estes, 853 F.2d 909, 912-913 (Fed.
Cir. 1988). "[S]tate courts are competent to resolve disputes likely to
be dominated by ordinary contract principles . . . even though the sub-
ject of the dispute is a right created by federal law." Saturday Evening
Post Co. v. Rumbleseat Press Inc., 816 F.2d 1191, 1194 (7th Cir.
1987). For federal jurisdiction to lie, federal law must provide the
cause of action or the exclusive remedy, or the case must involve a
substantial federal interest. See T.B. Harms Co. v. Eliscu, 339 F.2d
823, 828 (2d Cir. 1964). "The general interest that copyrights [or
trademarks], like all other forms of property, should be enjoyed by
their true owner is not enough to meet this last test." Id.III.
Viewed from any perspective, this is not a Lanham Act case; it is
a simple contract dispute. It poses not a question of infringement, but
a question of ownership. Resolution does not depend on the Lanham
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F.2d 447 (4th Cir. 1990). The Act provides presumptive ownership of
trademarks to those holding certificates of registration, 15 U.S.C.
§ 1057(b), and conclusive evidence of ownership to those who have held
such certificates unchallenged for five consecutive years, 15 U.S.C.
§ 1115(b), with certain exceptions, see Brittingham, 914 F.2d at 453.
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Act or any other federal law, but rather upon the construction of the
contract under Puerto Rican law. We therefore have no business hear-
ing it in federal court. For this reason, we affirm the judgment of the
district court.
AFFIRMED
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